管理層發言
Good day, and welcome to HighPeak Energy 2026 Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you need to press *1 on your telephone. You will then hear an automated message advising your hand is raised. To remove yourself from the queue, please press *1 again. Also, the call is being recorded. I would now like to turn the call over to Steven W. Tholen, Chief Financial Officer. Please go ahead.
Good morning, everyone, and welcome to HighPeak Energy's Second Quarter 2026 Earnings Call. Representing HighPeak today are President and CEO Michael L. Hollis; Executive Vice President Daniel Meads Silver; Senior Vice President Christopher Mundy; and I am Steven W. Tholen, the Chief Financial Officer. During today's call, we may refer to our earnings presentation and press release which can be found on HighPeak's website. Today's call participants may make certain forward-looking statements relating to the company's financial condition, results of operations, expectations, plans, goals, assumptions, and future performance, so please refer to the cautionary information regarding forward-looking statements and related risks in the company's SEC filings, including the fact that actual results may differ materially from our expectations due to a variety of reasons, many of which are beyond our control. We will also refer to certain non-GAAP financial measures on today's call so please see the reconciliations in the earnings release and in our investor presentation. I will now turn the call over to our President and CEO, Mike Hollis.
Thank you, Steven. Good morning, everyone, and thank you for joining us today to discuss our second quarter 2026 results. It was another strong quarter for HighPeak. Our team continued to do what they have consistently done: execute the development plan, operate efficiently, spend capital responsibly, and focus on creating long-term value for our shareholders. Production during the quarter was essentially flat with the first quarter and once again came in above the high end of our guidance range. That performance reflects the quality of our assets and, more importantly, the ability of our operations team to consistently deliver results. From a capital spending perspective, the second quarter was expected to be our highest spending quarter of the year when we built our 2026 plan. During the quarter, we also chose to pull forward some completion activity that was originally scheduled later in the year. We saw an opportunity to lock in attractive frac pricing and continue working with a simul-frac crew that has been generating meaningful efficiency gains, faster cycle times, and lower costs. When we see opportunities to improve returns and create additional value, we are going to take advantage of them. Advancing that work allowed us to do exactly that while staying within the disciplined framework we have used throughout the year. As a result, we expect capital spending to decline meaningfully during the second half of 2026, which is consistent with our original plan and reflects the amount of development work completed during the first six months of the year. On the cost side, our team continued to make solid progress. Drill, complete, and equip costs remained in line with expectations, and we continue to drive operational improvements across the field. Lease operating expense performance was particularly strong with the first half unit LOE coming in approximately 13% below the midpoint of our full year guidance. It is worth noting that these results include the impact of an expanded workover program that we intentionally pursued during the quarter. As commodity prices improved, we identified opportunities to invest modest amounts of capital into low-cost, high-return workovers that brought meaningful production back online as well as enhanced the productive capability of those wells, all while generating attractive economics. We will discuss that program in more detail later because it highlights the kind of practical, return-focused decision making that drives value at HighPeak. Financially, stronger realized oil prices combined with consistent production drove sequential growth in both adjusted EBITDA and free cash flow. We achieved those results despite absorbing approximately $55 million of net cash hedge losses during the quarter. Looking ahead, a larger percentage of our expected production remains exposed to spot pricing, which positions us to benefit if commodity prices remain supported by the ongoing uncertainty in the global supply market. Bottom line, we are pleased with where the company stands today. Our priorities have not changed. We are going to continue developing our assets safely and efficiently, allocating capital with discipline, keeping a close eye on costs, and building a stronger business quarter over quarter. That is how we have operated for multiple years now and that is how we will continue creating value for our shareholders. Turning to Slides 5 and 6 of our investor presentation, these slides highlight the progress we have made against our 2026 development plan throughout the first half of the year. The operations team continues to execute at a high level across the board. On the drilling side, we kept driving efficiencies and drilled 17 of our planned 29 wells during the first six months of the year. On the completion side, we completed 24 of our planned 33 wells for the year, reflecting the decision to pull forward a portion of our second completion activity and take advantage of favorable market conditions. As we have discussed, the accelerated completion schedule allowed us to capitalize on attractive service costs and continue working with a high-performing simul-frac crew that has consistently delivered strong results. Despite some additional, fully expected frac-impacted oil volumes, production was supported in the quarter by the success of our workover program and the associated oil volumes from that work. We have already turned 20 wells into sales this year, which puts us in a strong position to achieve our full year target of 37 turn-in-lines. When we built our 2026 development plan, we expected roughly 60 percent of the year's capital to be spent in the first half. Because we elected to accelerate a portion of our completion activity, first half spending ultimately moved into the mid- to upper-60% range of our annual budget. Now, that was not unplanned spending. It was capital deployed against productive work that generated value and advanced our development program ahead of schedule. The benefit of that strategy is that a significant amount of this year's development work is now behind us. We have put ourselves in a position to maintain strong production levels while materially reducing capital spending in the second half of the year. That is exactly the kind of setup we like. We get the benefit of the work completed earlier in the year, lower capital requirements going forward, and the opportunity to generate stronger free cash flow through the balance of 2026. Most importantly, we are accomplishing that while staying disciplined, executing the plan, and continuing to focus on long-term value creation for our shareholders. Turning to base production optimization: one of the best examples of value creation during the quarter was a successful workover program. As commodity prices improved, we saw an opportunity to put additional capital to work in parts of the business where the returns were compelling and the risk was low. Our team went well-by-well across the asset base and identified opportunities where a relatively small investment could bring meaningful production back online as well as enhance the productive capability of those wells, again all while generating attractive economics. We like these projects because they are straightforward, capital efficient, and pay back quickly. In many cases, we are investing a fraction of what it costs to drill a new well while getting production back online in a much shorter time frame. From a returns perspective, these are some of the highest-value opportunities we have available. The workover program is not a replacement for our development program; it is a complement to it. We are continuing to develop our inventory, and we are also making sure we maximize the value of every asset that we already own. That is just good field management. At HighPeak, we have always believed capital should go where it can generate the strongest returns. Whether that is drilling a new well, completing a DUC, or putting capital into a workover, we are going to evaluate every opportunity the same way. The goal is simple: invest wisely, increase production, generate more free cash flow, and create long-term value. This quarter's workover results are another example of our team's operational focus and disciplined approach to capital allocation. We identified an opportunity, moved quickly to capture it, and delivered strong returns on that investment. Now looking ahead to the rest of 2026, we are in a good position. A large portion of our expected oil production is exposed to market pricing, which gives us greater participation if commodity prices remain strong. At the same time, we are not in the business of speculating. We are in the business of generating cash flow and protecting returns. That is why we continue to maintain a solid hedge position with the majority of our oil hedges sitting in the mid-$60 per barrel range. Those hedges provide meaningful downside protection while still allowing us to benefit from a stronger price environment. We take a practical and disciplined approach to risk management. During the quarter, we added a number of positions designed to reduce volatility and protect cash flow where we saw the opportunity to do so at attractive levels. Specifically, we added NYMEX-WTI roll swaps to manage calendar spread exposure and Waha basis swaps to help reduce our exposure to fluctuations in West Texas natural gas prices. The objective is pretty simple: we want to protect the balance sheet, preserve cash flow, and maintain the financial flexibility to continue executing our development plan regardless of where commodity prices move in the near term. We believe that is the right approach for our shareholders. We hold meaningful upside when markets are strong but we also want to make sure that we are protecting the business during periods of volatility. This approach positions HighPeak to continue generating value for shareholders in any market environment. Turning to our first half 2026 operational and financial scorecard, I think this slide tells a pretty simple story. Our team went out and executed. Across the board, we either met or exceeded the goals we set for ourselves while continuing to stay disciplined on cost, capital, and operations. Production averaged 45.5 thousand BOE per day during the first six months of the year, exceeding the high end of our guidance range. That is a direct result of strong well performance, disciplined execution of our development program, and the ongoing work our team is doing to maximize the value of our existing production base. On the cost side, the results were equally strong. Unit LOE averaged $7.56 per BOE, which came in approximately 13% below our guide level. That is not the result of a one-time event or simply getting lucky. It is the result of years of work focused on building more efficient operations through infrastructure improvements, electrification, field-level optimization, and a culture that is constantly looking for ways to do things better. Most importantly, these cost savings are proving to be durable and sustainable. Our development program also continued to perform exactly as planned. During the first half we drilled 17 operated wells, completed 24, and turned 20 wells into sales. As we discussed earlier, we made the decision to accelerate a portion of the completion activity into the second quarter to capture favorable service costs. That decision allowed us to get more work done sooner, improve capital efficiency, and position the company for significantly lower capital spending during the second half of the year. From a capital standpoint, we invested $185.9 million during the first six months of 2026. Even with the accelerated completion program, we remained fully aligned with our full year development budget. We did not spend more money; we simply chose to spend a portion of it earlier to capture efficiencies and create additional value. The combination of strong production, lower operating costs, and disciplined capital execution generated approximately $281 million of EBITDAX during the first half. Those results highlight the quality of our asset base, the strength of our operating model, and the cash-generating capability of the business. At the end of the day, this is exactly the kind of performance we strive for. We delivered production above expectations, kept costs under control, executed the development plan, and maintained capital discipline. More importantly, we positioned the company to generate stronger free cash flow during the second half of the year as capital spending comes down while production remains strong. That is the formula we are focused on: consistent execution, efficient operations, disciplined capital allocation, and creating long-term value. As we wrap up today's prepared remarks, I leave you with a few final thoughts. HighPeak is exactly where we want to be. We built this year's plan with the understanding that commodity prices would remain volatile, and we manage the business accordingly. The results we are delivering today reflect the strategy that was designed to generate strong returns and free cash flow across a range of market conditions, not just in the perfect environment. Our maintenance-mode development program is doing exactly what it was intended to do. We are maintaining strong production, spending substantially less capital than we have in prior years, and generating increasing amounts of free cash flow. Just as important, we preserve flexibility. If market conditions change, we have the ability to adapt while continuing to focus on long-term value creation. We cannot control commodity prices, interest rates, or geopolitical events. But we can control how we operate the business, and that is where our focus remains. We will continue allocating capital with discipline, protecting the balance sheet, driving operational efficiencies, and generating substantial free cash flow. We have always believed that successful companies are built by making sound decisions quarter after quarter and year after year, and that is exactly what we are doing at HighPeak today. We have a high-quality asset base, a proven team, and a development inventory that gives us confidence in the future of this company. Most importantly, we are committed to creating long-term value for the people who have invested alongside us. Our strategy is straightforward: operate efficiently, spend capital wisely, and generate strong returns and let the results speak for themselves. Before we close, I want to thank the employees. The results we discussed today are a direct reflection of their hard work, commitment, and focus on operating safely and efficiently every day. I would also like to thank our shareholders for their continued support and confidence in HighPeak. We do not take that trust lightly and we are committed to earning it every day. With that, operator, we are ready to open the call for questions.
分析師問答
Thank you. You will hear an automated message advising your hand is raised. If you would like to remove yourself from the queue, press *1 again. We also ask that you wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. Our first question is coming from the line of Jeff Robertson of Water Tower Research. Please go ahead.
Thank you. Good morning. Mike, can you talk a little bit about the impact on second quarter production from accelerating some of the completions into the quarter and what you would anticipate for the rest of the year just based on your schedule of additional wells to turn in line?
Absolutely, Jeff. Great question. With a smaller production base and as we move activity around, more specifically on the completion side of the business, you do affect existing production by stimulating wells in a certain area. We refer to that as frac-impacted oil volumes. As you can imagine, the second quarter was going to be a more active, completion-intense quarter by design, and we pulled four additional completions into that quarter. So, to your point, we had more frac-impacted oil volumes than we had initially anticipated. When you look at our maintenance-mode program, you will have some lumpiness as we move that frac crew around and have breaks in the schedule. If you were looking at daily volumes, you will see some movement. But we guide on a yearly basis, and when you look at the first six months of the year, we are above that guided range pretty significantly. There are a lot of pieces that go into that: the actual well performance we are seeing from our development program, and, as I mentioned earlier, the workover program. The read-through is the budget is set; we just pulled forward some of that opportunity because we had a condition where we had a good frac crew at a good price in a good market, and they were very efficient and effective. So we went ahead and had them do a little more work. For the whole year, the read-through is obviously less capital will be spent in the second half of the year. The drilling rig schedule is a little tough because it's one rig — it is either on or off. The plan is to continue to drill with that one rig throughout the entire year. You can see in the first six months, we drilled one additional well above what we had planned for the year just because of drilling efficiencies. We would expect something similar for the second half of the year, maybe one additional well drilled. But the drilling portion of capital spend is fairly small — think somewhere in the 30% range of a well's AFE. On the completion side, we will do the budgeted amount of completions throughout the year; we just performed 60-9 percent of that work in the first half of the year. So think fewer frac-impacted volumes as you go through the rest of the year than what we had in the first half, as well as some impact from the workover program that we have. We think volumes will stay strong throughout the last half of the year, and, hopefully, commodity prices are supportive as well. But at any reasonable oil price, we will generate significant free cash flow throughout the remainder of 2026.
Mike, I know it is way too early to talk about—or it is too early to talk about 2027 guidance—but can you just talk about the cadence in the second half of 2026 and maybe the drilling spilling over into the first part of 2027? Will the setup for next year from a production standpoint be somewhat similar to what you all were thinking when you came into 2026?
Absolutely, Jeff. The original plan was to have somewhere in the 10-plus DUCs move into 2027 out of this year's program. Being able to drill two additional wells throughout the year just because the rig is more efficient means two additional DUCs move into 2027. The fact that we are only going to do the set number of completions we had in the budget means 2027 is set up to look a lot like 2026 as far as capital requirements as well as production volumes.
Just turning to the balance sheet, Mike, you had $146 million of cash at the end of the quarter and scheduled amortization of the term loan of $30 million per quarter starts at the end of the third quarter. Can you talk a little bit about how you are thinking of liquidity on the balance sheet and paying down or amortizing the term loan and the free cash flow build? Would it be reasonable to expect that you amortize the term loan, to the extent you can, faster than the $30 million per quarter?
Great question. We will amortize at $30 million a quarter. To do more than that, we need to manage cash carefully because while at today's oil prices we are likely to generate much more than $30 million per quarter, prepaying the term loan too much reduces flexibility — you cannot reborrow it like a revolver. So you will see us be cautious about paying down above the $30 million for the next quarter or so. It all depends on free cash flow generation per quarter, which is mainly driven by oil prices, which we cannot predict. But we will definitely do the $30 million a quarter, and we will maintain enough cash on hand to be able to weather variability over the next year or so and into 2027 and beyond.
One moment for the next question. Our next question is coming from the line of Nicholas Pope of Roth Capital. Please go ahead.
Morning, guys. Quick questions here. Looking at the workover load that you all had in the quarter, saw a bit of an uptick. You highlighted it that there is a lot of work to do there. Curious how to think about inventory — what the running room is on those workovers, and how those manifest themselves either in production or cost where that necessarily shows up in the income statement. Kind of where you all expect to see the benefit, and how much sight you have on the potential for more of those workovers.
Sure. I would love to tell you that wells never fail and operations are always easy. In reality, our job is to make operations look stable and predictable, but things do happen. Typically, when we choose to do a workover, we will not take a well that is producing just fine offline to do the work. Eventually, something will happen on a well that requires intervention. Through the first half of this year, we have called up most of what we had banked as wells that we could quickly pull forward. On a go-forward basis, wells will need to be worked on — we have to be there to do that work. That is when we will incur additional workover expenses for mini stimulations, acid, surfactants, lowering pumps, and other optimizations to enhance the wellbore's ability to deliver. We cannot forecast precisely when a particular well will require work because we are always working on the other side of that equation to keep wells producing and LOE costs down. So we are on both sides of the equation, but the read-through is that there will always be opportunity for these workovers going forward. In terms of cost classification, much of this shows up in LOE because some of the work is replacing rods or performing maintenance that would have been required anyway. On the capital side, if we do a mini stimulation that we think increases reserves from that wellbore, we capture that as capital. Got it?
Got it. Thank you. And then further on some of the questions that Jeff had, looking at the quarter, the gas weighting obviously had a lot more gas volumes and had negative gas prices during the quarter. Curious what you all are seeing here in the second half of the year, both with pricing and being able to move that gas, and how much of that weighting is somewhat transient with some of the work that got brought forward with those high gas volumes and your ability to manage that in the second half of the year?
Great question. I'll step back a bit to explain why the oil percentage went down to 64% from our guided range of 67% to 68%. A couple of reasons: we did a lot of stimulations in high-production, high-oil areas in the second quarter, which results in frac-impacted (watered-out) oil volumes. Many of the high-oil-content wells — say wells making a couple of 300 to 400 barrels a day — are at a higher oil cut than wells producing 100 BOE per day. By stimulating those high-rate wells, you can temporarily lower oil intensity. Offsetting that, we also worked over several older wells producing 80 to 100 barrels a day that had higher gas cuts; we brought them back online and did mini stimulations that increased their production. That combination helped keep overall production flat despite the frac impacts, but resulted in a slightly higher gas ratio for the quarter, which is why you saw 64% oil. Looking forward, we feel comfortable with our 67% to 68% oil cut range and, having crossed the midpoint of the year, I would lean closer to 67% for the rest of the year. Regarding gas pricing, the industry experienced very negative Waha differentials in the second quarter. If you look at HighPeak compared to most peers, our negative realized differential of about $1.50 per MCF for the second quarter is relatively respectable. With Gulf Coast Express expansion coming online and other pipeline changes like Matterhorn Express, the Waha differential has improved from minus $3 to $5 per MCF to closer to minus $1. That means the negative impact on realized gas price is smaller for the rest of this year, so we will see much better gas realizations going forward. We have taken steps to hedge some of that volatility. One thing Permian operators are extremely good at is filling pipes, and pipes are often late. We expect potential takeaway tightness in late 2027 into 2028 and are preparing for that, but as of now for the next 12 months gas takeaway is not an issue. We have not had an MCF that we were not able to put into a pipe; we just were not getting paid well for it in Q2. Going forward, that will be much better in 2026 and at least through the first half of 2027.
Thank you. There are no more questions in the queue. That does conclude today's program. Thank you all for joining, and you may now disconnect.